For the past few months, I’ve been enmeshed in the MTA’s finances stretching back to 1970, and I can see now why politicians have such a tenuous grasp on how the authority is funded. The MTA is made up of various constituent agencies that each operate essentially for 24 hours a day, seven days a week. It has a massive payroll, an extensive operating budget and a separate capital budget. For state legislators who must balance competing demands, understanding this financial structure isn’t — and probably shouldn’t be — a top priority.
Yet, yesterday, while watching MTA CEO and Chair Jay Walder respond to questions from the State Senate Transportation Committee, I was reminded again just how poorly Senators understand how their own actions impact the MTA and downstate regional transportation. Throughout the committee hearing, the State Senators repeatedly spoke out against the payroll mobility tax. It’s somewhat odd that these representatives chose a hearing with Walder to attack the tax because Walder wasn’t even in the United States when the tax was approved as part of the funding package. Plus, the Senate — and not the MTA — was the driving force behind the tax, and if anything, they should debate amongst themselves the best way to fund transit. But I digress.
As the hearing wore on, the Senators ramped up the rhetoric. One from Long Island called it a “draconian” measure that has allegedly crippled the downstate economy. Another wondered why the MTA is so adamant about the millions generated by the tax now if, three years ago, it operated perfectly fine without one. “We didn’t have a payroll tax a few years ago. Why can’t we go back to that?” asked one Senator who later said that it “may be difficult” for the state to replace the $1.4 billion the tax generates.
Walder was unequivocal in his statement in response. “It would be impossible for the MTA to replace $1.4 billion,” he said. He calmly and forcefully explained that the service cuts instituting in June saved the MTA $100 million while the fare hikes raised another $350 million and internal belt-tightening led to $500 million in recurring savings. To go through that process again would hinder the authority’s ability to deliver the subway service its riders demand, and it can’t raise fares 33 percent to cover a potential billion-dollar operating gap.
So why do these myths that the MTA could do without the payroll tax persist? It is in fact a myth of Albany’s making. The reason why the MTA saw its operations budget deficit jump precipitously toward the end of the last decade is debt. As Albany scaled back its direct contributions to the MTA’s capital plan, the authority turned to bond financing instead, and the repayments started coming due. Thus, debt service payments jumped into the $1-$2 billion range, and the MTA had to scramble to pay for both the transportation services is must provide and the debt service it is contractually obligated to repay.
State Senators seem to have a myopic view of MTA financing. If it worked three years ago, why can’t it work today? The problem is that MTA’s economic obligations have increased because of Albany action from decades ago. When past leader try to make future generations pay for their capital work, the bill will eventually come due, and that’s what our current Senators don’t seem to understand.
To take away the payroll tax would starve the MTA of funds it needs to operate. Albany could find other funding mechanisms, but it now must lay in the bed it made. The MTA didn’t ask for this exact tax, but it needs the money. Anyone have a better solution?